LIVING TRUSTS FAQ

A living trust is a document that contains instructions for what you want to happen to your assets when you die. Unlike a will, a living trust can avoid probate at death, while allowing you to give what you have, to whom you want, the way you want and when you want. More importantly, a living trust prevents the court from controlling your assets if you become incapacitated.

It depends. Estate planning is not a one size fits all proposition. But for most families, a living trust is very effective. Ask yourself these questions:

• Do I own a home?

• Do I own property in another state?

• Do I own more than $100,000 in assets?

• Do I have children?

• Do I want the government out of my life?

If you answered yes to any of the questions above, you probably need a living trust.

A will does not avoid probate when you die. To the contrary, a will guarantees to subject your family to the cost, fees, and delays associated with probate. The court must validate a will in probate court before it can be enforced.

Also, a will can only go into effect after you die. Because of this, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die. This is a valid concern of millions of older Americans and their families. Fortunately, there is a simple and proven alternative to a will: the revocable living trust.

A revocable living trust avoids probate. It lets you keep control of your assets while you are living, even if you become incapacitated, and after you die.

Yes, you need a “pour over” will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will “catches” the forgotten asset and it “pours over” into your trust.

The asset may have to go through probate first, but it can then be distributed as part of your overall living trust plan. If you have minor children, you must use the “pour over” will to name their guardian after your death.

No. A living trust is for financial affairs. A living will is for medical affairs. It identifies who you want to make medical decisions for you if you cannot. It also declares whether you want the doctor to “pull the plug” if you are in an irreversible coma.

In California, a living will is also known as an Advanced Health Care Directive (AHCD). Contact our Cathedral City estate planning lawyer today if you have questions.

Not when compared to the alternatives of probate and guardianship. How much you will pay depends primarily on your goals.

It takes a little time, but not a lot. Remember, it will always cost more if you have to have a “rush job” from your attorney. So, if you think you want to create a living trust, see your living trust attorney sooner rather than later.

It should only take a few weeks to prepare the legal documents after you make the basic decisions.

Yes, but you need the right attorney. A local trust lawyer who has considerable experience in living trusts and estate planning will be able to give you valuable guidance and peace of mind. There are many different types of trusts in California. You want your trust prepared and funded properly in accordance with your goals.

Palm Springs trust lawyer Robert L. Firth frequently gives both public and private seminars on the subject of living trusts. If you would like to attend his next seminar or if you’d like to schedule a meeting with him to discuss setting up a living trust, call us to schedule an appointment today.

Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, called intestate succession, the court distributes your assets according to state law. Intestate succession is usually more expensive than probate with a will.

It can be expensive. Legal fees, executor fees, and other costs must be paid before your assets can be fully distrib­uted to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. These costs can vary widely.

Probate also takes time, usually nine months to two years, but often longer. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval.

If your family needs money to live on, they must request a living allowance. The court can deny this request.

Probate is a public process. Any “interested party” can see what you owned, whom you owed, who will receive your assets, and when they will receive them. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupu­lous solicitors.

Generally, in probate, your family has no control. The court process determines how much it will cost, how long it will take, and what information is public.

Not really. Using joint tenancy usually only postpones probate. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies, without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs.

Watch out for other problems. When you add a co-owner, your chances of being named in a lawsuit and of losing the asset to a creditor increase. There could be gift and/or income tax problems.

And since a will does not control most jointly owned assets, you could disinherit members of your family inadvertently.

With some assets, especially real estate, all owners must sign to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new “co-owner”—the court— even if the incapacitated owner is your spouse.

If you can’t conduct business due to mental or physical incapacity, only a court appointee can sign for you. This is true even if you have a will and own your property with your spouse. Remember, a will only go into effect when you die.

Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, will control how your assets are used to care for you. This “living probate” process can be expensive, embarrassing, time-consuming, and difficult to end. It is also public! It does not replace probate at death, so your family may have to go through probate court twice!

A durable power of attorney lets you name someone to manage your financial affairs if you are unable to do so. However, many financial institutions will not honor one unless it is on their form, or is more than six months old.

If accepted, it may work too well. It can give someone a “blank check” to do whatever they want with your assets. It can be very effective when used with a living trust, but risky when used alone.

When you set up a living trust, you transfer assets from your name to the name of your trust, which you control. For example, transferring assets from “John and Mary Jones, husband and wife” to “John and Mary Jones, trustees U/T/A dated (month/day/year).”

Legally you no longer own anything. Everything now belongs to your trust. So there is nothing for the courts to control when you die or become incapacitated. It is a simple concept that keeps you and your family out of the courts.

Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before: buy and sell assets, change or even cancel your trust. That’s why it’s called a revocable living trust. You even file the same tax returns. Nothing changes but the names on the titles.

Unfortunately, no. Because you can change the terms of your trust and can put property into and out of your trust at your discretion, a living trust will not protect your assets from your creditors. But it may protect the property that your heirs inherit from creditors after you die. Discuss this with our Palm Springs living trust attorney for more details.

It’s easy, and your attorney, financial adviser and/or insurance agent can help. Typically, you will change titles on real estate, stocks, CDs, bank accounts, investments, insurance, and other assets with titles. A simple assignment form can take care of personal items. Personal items may include jewelry, clothes, household possessions, and other assets that do not have titles. You should also change some beneficiary designations (i.e. insurance poli­cies) to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die. Retirement plans such as IRA, 401(k), etc. can be exceptions.

Most people want and should be the trustee of their trust. However, some people select a corporate trustee, like a bank or trust company to act as trustee or co-trustee. This is especially true if they don’t have the time, ability, or desire to manage their trusts. This can also be true if one or both spouses are ill.

Corporate trustees are expe­rienced investment managers. They are objective and reliable, and their fees are usually very reasonable. Most corporate trustees require a minimum-sized estate to manage.

California also has licensed professional fiduciaries who can serve as a trustee. Professional fiduciaries are unaffiliated with a bank or investment company.

If you and your spouse are co-trustees, either can act and have instant control if the other becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.

If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you resume control.

When you die, your successor trustee pays your debts, files your tax returns, and distributes your assets. All can be done quickly and privately, according to the instructions in your trust, without court interference.

Successor trustees can be individuals and/or corporate trustees. Individuals can include adult children, relatives, or trusted friends. If you choose an individual, you should also name some additional successors. This is in case your first choice is unable to act.

Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer under certain circumstances. These circumstances can include:

• Providing for a loved one with special needs

• Protecting assets from beneficiaries’ creditors, spouses, and future death taxes.

Your estate will have to pay federal estate taxes if its net value when you die is more than the “exempt” amount at that time. However, if you are married, your living trust can include a provision that will let you and your spouse use both of your estate tax exemptions. This allows you to leave more of your assets to your loved ones tax-free.

Not quite. A will can contain wording to create a testamentary trust. You can use this to save estate taxes, care for minors, and more. But, because it’s part of your will, this trust cannot go into effect until after you die and probate occurs. So it does not avoid probate and provides no protection at incapacity.

If we missed something you have a question about, please feel free to reach out to our office to discuss your situation. Our Cathedral City living trust attorney can answer your questions and help you understand your best legal options. We look forward to hearing from you and seeing how we can help. Call us or fill out our online contact form.